On paper people were "saying" they were getting 12% cap rates - but they over estimated income and under estimated expenses. The reality was they were buying at cap rates of 6% to 7% for relatively management intensive properties. People were borrowing money at 9% plus.

At the same time people were qualifying for loans with banks for single family home purchases, that allocated 35% plus of their income to paying the artificially low interest rates that would sure adjust upward. The generally accepted underwriting guidelines is that housing expenses shouldn't exceed 25% of family income.

These were the facts. I believe they were self apparent to anyone who was in the business. Who was at fault? Who cares. I am an entrepreneur - when the game is obviously stacked against me I sit out.

What many people miss are that no one can time the market perfectly. And you don't have to time the market perfectly. If you can buy at a price that allows you to hold the property long term and make a great yield - that is a great time to buy. And when someone wants to buy that property at a price that is ridiculous, you then have a choice to sell.

But beware - at the time it is best to buy, there is always a panic/fear/naysayer/the sky is falling attitude. And the at the best time to sell there is always a greedy unrealistic expectation that the markets will go up for ever.

If you can remove emotions and let cap rates be your "blind" instrumentation - you can then focus on buying the right properties, at the right price and managing them effectively.

[QUOTE=SilentPartner;242842]What many people miss are that no one can time the market perfectly. And you don't have to time the market perfectly. If you can buy at a price that allows you to hold the property long term and make a great yield - that is a great time to buy. And when someone wants to buy that property at a price that is ridiculous, you then have a choice to sell.

But beware - at the time it is best to buy, there is always a panic/fear/naysayer/the sky is falling attitude. And the at the best time to sell there is always a greedy unrealistic expectation that the markets will go up for ever.

This is very true we are buying in the USA ..for cash flow right now....Appreciation is speculation if and when it comes back. I feel most are wrong. I don't see 5 years to golden days. I see a mess for a bit longer here in the USA ...I am 38 years old and I expect that when I turn 48 things should be cleaning it self up.Again this is speculation. Real estate ( leave your emotions at home again this is not a business for the faint of heart) there is alot of stress and what if's that can and will go wrong with in this business.

Great Time To Buy

All: Morgan Stanley published their report "Housing 2.0 - The New Rental Paradigm" late October. They recommended to their clients single family residential housing as the highest yielding asset class currently available.

They were not afraid to talk about appreciation ON TOP OF good cash flow at true net yields between 8 and 12%. That is not an income capitalization rate but a true net yield. Morgan Stanley points out that if you buy at wholesale and the current wholesale sales price is decoupled from the retail rent rates, so there is a significant appreciation opportunity in price normalization when it occurs estimated at between 30 and 60% over the next five years on top of positive cash flow.

Already in cash flow markets like Memphis, Phoenix and Atlanta well located A grade wholesale rentals are nearly impossible to find at less than retail sales prices. Now B grade rentals are beginning to appreciate.

This is a story of two markets: Retail house sales are not seeing much appreciation although Five Star neighborhoods (as scored by Where To Live Books USA, in cooperation with Barbican Publishing Auckland) are seeing some single digit appreciation. Wholesale homes that are being bought between 40 and 60% of retail as performing rentals are as valuable as a retail house. The house does not care! However the next buyer, (another investor or future owner occupier) will pay considerably more. This is very reasonable and predictable appreciation considering that because of relatively unusual circumstances this home was bought well off the market price.

The danger with foreigners buying US property are the shonky operators that add a 20,000 to 50,000 bump to the sales price. We have seen others sell at customary rates and full disclosure. Guaranteed, if the Australian or NZ (*or anywhere for that matter) sales operation does not disclose the property address for available properties they are "bumping the price" and screwing the investors. Asking price and real rent rates for any specific American house address are readily available on the internet. RentRange.com.

We publish Personal Real Estate Investor Magazine as the largest newsstand publication in the US. We have many responsible clients who understand foreign portfolio management, and we understand who many of the bad guys are who hurt our industry.

There is a fair post. Curious but why would you all buy with out seeing the properties or visiting the USA..I am at a loss when I hear the words .Don't rely on rent range not always that accurate. Zillow is more up to date.Also has the sold homes in the area. Rentals and properties for sale. Better to get an idea of current market.

Don't care for Phoenix , to far for me .Love Memphis but don't invest in that market. Atlanta and Charlotte for me.

Love to see you magazine..

Alex

PS I will say one thing people need to keep in mind most of these house require rehab any where from $5k to $15k ( in my markets)so do take that in mind. Then add in these are turnkey properties ...Fixed and ready to go..

We have personally invested and continue to invest in Memphis and Atlanta. At the moment, we are focusing more on the Atlanta market though as we see more upsides with this market in the near term. Inventory have been depleting (short sales, foreclosed, ROE properties, etc). Investors (large and small) are bidding up prices of these homes. There are still some great deals to be bought but it's getting harder to find. Once the window of opportunity to invest in Atlanta is gone, we can always go back to buy more in Memphis. Also, have been doing some serious research in Texas and Florida, but will not make any move until perhaps next year.